It’s quite funny how tuition has been able to resist the laws of physics within the past years of recession. Unlike the mortgage industry where it took a nice dive south in 2008, tuition has been able to resist this urge and continues its leap. In fact for public schools the annual increase has been 6.5% each year for the past decade. However certain policies both fiscal and monetary are out there, but how much do they even help?  If they don’t help at all I sure as heck would like to know of some alternative options to college that might provide more of a benefit in securing a financially secure future. While the public is told that colleges are a promising step to securing a financial future, the cost of tuition seems to act as a stump towards finishing the end of that promise. This stump hurts many aspects of society, mainly the middle class American dream. An important value that has become more demanded but less available to the public with some more than others.

After considering some numbers on this chart, it might seem that coming out of college in debt would most likely put the average college student few tens of thousands in debt and for some, many tens of thousands.

Considering that the average tuition for college graduates is around $45,000, it would seem that is very possible to manage the debts out of college. For loans taken after 2013, Obama’s new policy that fixes loan payments to 10% of monthly income will be able to ease the stress of paying back the loans. Unfortunately, this only covers federal loan debt, which is helpful considering that federal loans take up 90% of the student loan market. Yet, only around 1.5 million are even eligible to use President Obama’s “Pay as you Earn…” plan. This is because in order to qualify for the policy, a borrower must have an outstanding federal debt in comparison to their family size. This obviously helps the lower socio-economic borrowers, but this leaves a wide gap towards the rest of the “middle* (middle class is no longer middle class)” class borrowers –borrowers whom are actually the most worst off in terms of college loans. Because federal aid is limited to those who are in more well off financial situations, borrowers in this category must resort to private lenders, primarily like those of Sallie Mae.

Sallie Mae “also offers reduced monthly payments, extended repayment schedules, and likely some less-advertised hardship programs. In their letter to the CFPB, they also state that they are in favor of rehabilitation programs for private loans that can help borrowers recover from default.”

Yet after looking at the so many videos, blogs and comments , it’s obvious that Sallie Mae doesn’t have a practical way of helping borrowers. For that reason, it’s common to hear stories of loan debt from Sallie Mae being doubled and paying monthly rates of over 1500.

Tiffany, a borrower who has suffered the much too common problem comments,

“I’ve spoken to their reps many times and it seems they can never help or answer any of my questions. I asked them how much of what I do pay actually goes to the primary loan and how much goes to interest. that rep couldn’t answer me. Just said I don’t know and I’m sure your loans will go down. (they haven’t) they have actually almost doubled ($25,000) now ($45,000). I am now searching for outside help and hoping to get someone involved because it doesn’t seem right to do all these programs and the sum of the loan never [goes] down.”

Responses like these are all over loan assistance forums, blogs and YouTube.

What it comes down to is whether these loans are affordable to the borrower in a way that takes into consideration the most important factors of the economy. Is the borrower entering a sound financial market in the coming years? Will the economy shape up and provide enough quality jobs to sustain borrowers in their repayments? Are interest rates comparable to these factors?

Interest Payment
11.875% $197.92               $392.92 72 $33,753.19

Fixed Payment
12.375% $25.00 $414.73 96 $40,434.05

Deferred Payment
12.875% $0.00 $410.66 108 $44,185.09

These are all questions that answer themselves but have not been replied by the government or the institutions themselves. Obviously, with the current average salary of $45,000, repaying $30,000 would take over 15 years IF the income to ratio payment plan was available to use. One can only expect a borrower from Sallie Mae who is unable to use an income ratio payment plan to be in a much more difficult situation to say the least.This is the repayment plan for $20,000 loan. Why should a loan increase over double the amount when deferred? The deeper question is: Why would someone take out such a loan with the imposed risk of destroying oneself financially?

It’s about time that not only private lenders like Sallie Mae change their lending practices, but also borrowers become more responsible consumers by taking a stand against predatory lenders. But in reality this requires students to look towards other alternatives and sadly there are no real alternatives that provide such assistance. That means a lot of students would have to stop going to school and the future of college students would drastically drop in numbers.

Of course this adds the benefit of pushing for reform in creating alternatives to the whole post-secondary educational system, but the time that it would sacrifice would be much to dire for a single generation to make this move. Therefore, the only plausible solution would be for reform, like any sustainable reform, to happen slowly. This will act as yet another barrier to allowing current college debt holders from being able to pay their debts off.

If one was looking to find a solution in today’s market, one would have to focus on a career that is in demand and provides a secure return. Two of those jobs are nursing and teaching. Since baby boomers are now retiring a great number of those jobs are becoming increasingly in demand. These jobs even if requiring a large sum of debt are secure

This could create a major shift in the workforce where middle class Americans are fighting more for a secure workplace rather than their dream job. These attitudes already exist primarily in majors like pre-med, engineering and accounting but a severe shift into these jobs could create a problem of supply and demand in future generations. As of now, they remain as a credible option for securing a life as a middle class American and more importantly getting the bang for the buck.It’s unfortunate that the solution to the economic market requires overlooking the value of the educational institution and instead considering the conditions of the job market. It completely debases the goal of universities of spreading diversity, education and promising a future. Money is spread too far thin in America and economic security is only available in the holes in which it leaks. As nursing and teaching jobs are being widely pursued after, it is evident that more and more students are becoming aware of this fact.enough to pay off debts and provide a financially secure future.

Given that there are so many fields of careers in each of those industries that are increasing and decreasing at different paces, the prospect of the job market varies with holes that are both hidden and publicly evident. So looking for those things is important in order to really make a conscious decision in the future path of a post-secondary education. Within all these holes of mysteries and wonders the only way to really find a secure route towards careers, ones like public relations, journalism, business, philosophy etc. , institutions have to provide resources that cater to these fields –things like specific training and hands-on (internships) that give a more practical and applicable tool to the student.

The company, Coursera does this exact thing. Founded by Andrew NG, Coursera is a site that offers the “world’s best courses, for free.” This is an example of a tuition return at its finest. Free tuition and specific helpful resources. This helps employers as well as it locates them with specialized workers whose educational background can be used more accurately and in sync with what they are looking for. This also does tuition cost a service as an institution like Coursera has all the ability to compete with universities if they were to be recognized by employers. I hope sarcasm is ringing its bells, because a zero cost tuition could equate to a complete reform of the tuition market.

Naveed, an environmental engineer explains that Coursera is in a way

“recycling information within the educational system.”

Within all this commotion and episodic dialogue there is a piece of thought I hope to shed light on. The importance of college tuition has become emphasized more than ever in the past decade and yet it’s also the worst time to get one. Maybe in a couple years when alternative forms of education are properly institutionalized, one can expect to find a secure job without carrying a load of debt. As stated, this takes time and a lot of effort considering that colleges would not like to see their tuition costs diminish. But another important aspect to also consider is innovation. The great country of USA has been excelling in innovation, but education has yet to reap its benefits. But with technological advancements already taking place in companies like Coursera maybe one day Coursera might be referred to instead as an institution rather than a company or site.

An economy is only as good as the families that profit from it. And while, this may be the worst time in this article to get sensitive, protecting and nurturing families has always been the end goal of having a good economy. The economy should never discriminate against class, race or ethnicity but unfortunately that is not the case. With tuition costs expected to increase, society can only expect to continue redlining certain audiences of the public.

Certain audiences would fall under immigrants, minorities –first generation college students who are only beginning to transition into post-secondary system. The time is more important than ever for a revolution for integration to occur but that is difficult to do when private lenders like Sallie Mae thrive from these very people. There is obviously a lot of sewage that drains from college tuition, but the problems leak far deeper than publicly acknowledged and it is important time to begin looking into these matters.

Otherwise we are headed into a catastrophe that could yield devastating systemic blow to the educational system, financial system and government. Based on the history of America’s economic and political system, it’s now more than ever that the cost of education is hurting the economy more than ever.

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References

http://pnpi.newamerica.net/sites/newamerica.net/files/program_pages/attachments/college%20published%20tuition%20and%20fees%20chart%20year.png

http://aspanational.files.wordpress.com/2011/12/collegestuition.jpg

http://xmiragestat.files.wordpress.com/2014/04/higher-education-increase.gif

http://www.clearpointcreditcounselingsolutions.org/how-to-pay-off-private-student-loans-from-sallie-mae-and-other-lenders/

Kiyoshi Kimura, president of Kiyomura Co, paid $1.76 million for the bluefin tuna he had won at the Tsukiji Market auction in January last year. As his staff towed the prized tuna back to his restaurant, the cart carrying the giant fish was surrounded by groups of professional photographers. He posed for a photo before he cut the tuna, his employees clapping hands in the background.

The picture that ran next to headlines about the eye-popping price tag for a single bluefin tuna is a snapshot of a lucrative industry spinning out of control due to a decade of overfishing under lax regulation.

Fed by ravenous demand from sushi lovers, Japanese and European fleets have exploited the commercial value of bluefin tuna and nearly depleted its stock in the Atlantic and the Pacific Ocean.

“The stock of bluefin tuna, by far the most valued tuna species, has been so heavily overfished in recent times that its collapse has become a very serious and threatening possibility,” said Fabio Hazin, chairman of The International Commission of the Conservation of the Atlantic Tunas (ICCAT), at a meeting in 2008.

Days after Kimura bought his tuna, the Pew Charitable Trusts announced the number of Pacific bluefin tuna has declined by 96.4 percent from pre-1950 levels. The eastern Atlantic bluefin spawning stock has plummeted by nearly 75 percent over the past four decades, according to reports from ICCAT, a Madrid-based regulatory body with 47 members and the European Union.

Half of that loss, says ICCAT, occurred between 1997 and 2007, a period commonly known as “the golden years” among European fishermen. When the market for bluefin tuna took off in the 1980s, the advent of ranches — large coastal pens for fattening the fish before trading them with the Japanese — transformed the economic outlook of the industry. During the two decades followed, European ranchers and Japanese conglomerates worked together to take advantage of a lack of regulatory oversight. They caught as many as they wanted, and rested assured that state government would take whatever catch number they report for granted. The French government helped expand their fleets with subsidy, only to fuel a black market where trading unreported catch has become an international routine.

From Nobody to Somebody

Bluefin tuna has very few natural predators, but the species paid a price for becoming one of the most sought-after fish among well-heeled sushi devotees in Japan and worldwide.

In the 1960s, bluefin sold for a tiny fraction of its market price today. It was mostly ground up for cat food in the U.S., and dish made out of its meat held little appeal to the Japanese who preferred white-fleshed fish and shellfish. There were plenty of stock of bluefin around the northwestern corner of America, but commercial fishers considered it a trash commodity and passed it on to be the targets of weekend sportsmen.

The turning point came when sushi bars went global in the next ten years: Americans turned out to have an appetite for “toro,” the fatty underbelly of tuna commonly used for sushi. In Japan, people had grown accustomed to meat with strong flavors and dark flesh. It was also about this time that Japanese cargo planes, after delivering electronics to the U.S. market, started buying up cheap bluefin tuna near New England to sell them at a good price back home.

By the 1970s, bluefin tuna had caught on in Japan, prompting the nation’s importers to take in large quantities from fisheries worldwide. Fishing for bluefin in the western Atlantic increased by more than 2,000 percent between 1970 and 1990, according to the International Union for Conservation of Nature. The average price paid to Atlantic fishermen for bluefin exported to Japan exploded by 10,000 percent.

Today, Japan consumes about 80 percent of the bluefin tuna caught globally. The country is home to the Tsukiji fish market, the world’s largest seafood wholesale center. There, the annual fish auction held on the first Saturday in January demonstrates how much hype there is around bluefin tuna. For patrons of the auction, winning the head of a single bluefin tuna at an outrageous price is a fight for status and free advertising. Kimura, who became widely known after he paid $1.7 million last year, also won the bid this year and in 2012.

The auction price, as shown above, has soared since 2008, before taking a nosedive early this year. “The wildly fluctuating price demonstrates only that the auction is subjective and distorted, dictated almost entirely by the bidders’ wealth and whims,” writes Emma Bryce, a reporter with The Guardian.

Ranching to the Utmost

During the golden age for catching bluefin tuna Japan’s demand turned several family businesses in France into fishing empires. But it was the advent of “ranching,” the industrial method of fattening bluefin in underwater pens before selling them on the market, that facilitated the ruthless catch, particularly in the Mediterranean Sea.

Originated in Australia, tuna ranches were introduced by Spanish and Croatian fishermen to the Mediterranean area around 1998, the same period when ICCAT instituted the first quota on bluefin tuna. The old-fashioned way was to catch the bluefin near the shore and kill them immediately before returning them to the port. The advanced method is much more complicated: Purse seiners transfer the catch to cages; Tugboats slowly carry the cages — for as long as a month — to circular underwater pens located in coastal waters; Fish in the ranches are then fattened for months on sardine, mackerel, and herring till their fat content, flavor and color match the demand of Japanese consumers. Tunas at harvest are shot in the head and kept cool in cold seawater slush; In the end, most of the fish are shipped deep-frozen to Japan on refrigerated vessels, while the rest are packaged and flown to Japanese markets, where they’d be auctioned off fresh. See a video on how ranching works below:

Those circular ranches revolutionized the industry. Fishermen were able to steer their vessels father from the port without worrying the fish caught would rot on their way back to the port. The deeper the water, the larger the bluefin, and the bigger the profit.

“What you gain is consistency in the quality and the supply, because you are not subject to seasonal factors,” says Rex Ito, president of Prime Time Seafood, a Los Angeles-based importer that provides 85 percent of the bluefin tuna needed in L.A. restaurants. “It’s an efficient way of producing a quality product.”

Earlier, the supply of fresh bluefin could only last for a few months per year, with just a tiny percentage of the catch being fat enough. The introduction of ranches means fishermen in his greatest capacity, and hold on to his stock till Japanese traders are ready to deal. For connoisseurs, a stable supply enables bluefin tuna to be on the menu year-around.

Tuna ranches, says Ito, is what gave rise to increased fishing capacity and over-catching. His biggest suppliers are located in Spain and Mexico, where bluefin tuna are ranched and sold to sushi bars in the U.S.

Compared to Spain’s long tradition in the bluefin business, Mexico is new in the game. The country, which now catches the majority of bluefin in the eastern Pacific Ocean, adopted the ranching technology around 2000.

“You wouldn’t necessarily save money by keeping the tuna in a cage and feed it. The process is actually fairly expensive. It’s quite an operation,” says Ito. “But farming or ranching is the future of a lot of seafood.”

In Europe, ranching has helped French fisheries strike a fortune between 1997 and 2007, depleting the stock of bluefin in eastern Atlantic Ocean by half, according to an investigative report from The International Consortium of Investigative Journalists, a global network of 185 investigative reporters.

In Sète, a small trip nestled along the Mediterranean Sea, bluefin fishing has been a regional vocation for generations of captains. But it was the rise of bluefin and the technique of ranching that made them one of the wealthiest fishermen communities in France. They now operate the world’s most productive tuna fishing fleet, of which 36 multimillion-euro vessels target bluefin tuna in the eastern Atalantic Ocean.

Government subsidies played a significant role in the renovation and expansion of Europe’s powerful fishing fleets. The European Union and its member states, encouraged by a strong market demand for bluefin tuna, has poured €26.5 million into vessels in Sète between 1993 and 2007. The average French purse seiner in 1998 was twice as long and four times as powerful as they were two decades ago. By 2008, there were 131 purse seiners in EU fleet, and another 500 ships owned by ICCAT members outside the EU. All of them served the cause of exploiting the bluefin community. For owners who took out bank loans to purchase their pricey vessels, the only way to repay the debt was to over catch.

Japanese companies, even though at the very end of the supply chain, chipped in with money. They are known as “the architects and financiers of the ranching industry,” because they partnered with Spanish and Croatian fisheries in building and running the facilities. Paco Fuentes, a business mogul from Spain, jointly ownes Drvenik Tuna, a Croatian ranch, with Japanese conglomerate Mitsubishi and local partner Conex Trade. The man also serves as the general manager of Fuentes & Sons, which has eight ranching subsidiaries in six countries. When interviewed on the dire state of bluefin tuna, Fuentes said he didn’t consider it “an endangered species.”

“There are a lot of small bluefin tunas in the Gulf of Lion waters [near France],” he told ICIJ reporters.

Fish Till You Drop, Authorities Say

Tuna ranches inspired fishermen to maximize the economic benefit of bluefin tuna, and brought sushi lovers a sufficient supply of toro meat. But when the feeding frenzy went unchecked, it became gateway to a decade-long, illegal fishing craze in the Mediterranean.

Seventy-five percent of the region’s bluefin tuna stock had disappeared between 1998 and 2007, says ICCAT. During the same decade, off-the-book trade in bluefin market is estimated to be $400 million per year, says ICIJ reports. One out of every three bluefin was illegally caught, and a majority of them were young fish that have not yet reproduced. In 2008, the amount of eastern Atlantic bluefin tuna traded on the global market was still 31 percent larger than ICCAT’s quota that year. In 2010, the gap peaked at 141 percent.Ranching made it difficult to track the number of bluefin caught mainly because much of its operation is done underwater. Raising undersized fish may hardly be noticed when ranchers cleverly place them in a good adult mix; Fleets could transfer the fish immediately to another vessel without declaring the catch; A diver can simply stops videotaping and allows the fish to pass unrecorded when transferring them from net to cage, thus falsifying the catch number.

Unreported and illegal catches were fueled by a lack of accountability. One French fisherman named Nicolas Giordano told ICIJ that he and his peers declared freely their catch number until 2006 to the laissez-faire French government. “The administration didn’t do its job, and at the time no one took it seriously,” he says.

Until 2007, the French officials never bothered to verify the numbers reported, neither did the Spanish and Italian governments. They adjusted the figure further downward to meet the quota and then sent it to the European Commission, which in turn reported to ICCAT.

“The only country to give their real figures would get fined, so in that kind of game, everyone lies,” ICCAT scientist Jean-Marc Fromentin told ICIJ reporters.

In 2008, ICCAT introduced Bluefin Tuna Catch Documents, a paper-based catch documentation system aimed at tracking down every step of the bluefin trade along the supply chain. But only a handful of countries, mostly big players, have updated their documents since 2014. In response, ICCAT has put forward an electronic catch documentation system to counter the rampant black market.

Forging Ahead

Fuentes & Sons, now a leading seafood supplier in Spain, announced in December its plans to become the first to raise Atlantic bluefin tuna on land. The company would invest €5 million in building a hatchery for the endangered fish, with the expectation of producing about 500 metric tons by 2015.

Japan’s Fisheries Agency, on the other hand, has decided to rein in the nation’s catch of immature Pacific bluefin tuna. Starting in 2015, it would reduce by half the quota of bluefin tuna that are three years old or younger compared to the average catch number during 2002 and 2004.

The biggest market for bluefin has seen its officials turn down several batches of dubious bluefin imports in the past few years, but a moratorium on fishing bluefin seems unlikely given its popularity and economic value.

“They wanted the fatty fish and they recruited the people who could carry out this work for them. Now that the system is out of control and markets are saturated, they are scrambling to distance themselves from it,” said Sergi Tudela, head of Fisheries at WWF Mediterranean.

Reference:
http://www.theatlantic.com/international/archive/2014/01/sushinomics-how-bluefin-tuna-became-a-million-dollar-fish/282826/
http://www.icij.org/projects/looting-the-seas
http://www.theguardian.com/environment/world-on-a-plate/2014/jan/06/pacific-bluefin-tuna-auction-overfishing-sushi
http://www.bloomberg.com/news/2013-01-09/tuna-species-sold-at-record-price-faces-overfishing-study-says.html
http://www.nytimes.com/2010/06/27/magazine/27Tuna-t.html?pagewanted=all&_r=0
http://www.vanityfair.com/culture/features/2007/06/sushi200706
http://www.fis.com/fis/worldnews/worldnews.asp?monthyear=&day=11&id=67799&l=e&special=&ndb=1%20target=
http://bangordailynews.com/2014/03/23/business/japan-to-cut-bluefin-tuna-catch-by-half/
http://www.pewenvironment.org/uploadedFiles/PEG/Publications/Fact_Sheet/tuna-story-of-atlantic-bluefin-2013.pdf
http://www.pewenvironment.org/uploadedFiles/PEG/Publications/Fact_Sheet/tuna-story-of-pacific-bluefin.pdf

Faced with a rapidly changing consumer, the biggest hoteliers are changing their approach. In doing so, however, they threaten to almost entirely alter the hotel industry.

The hotel industry is not usually one known for innovation. In the last 40 years, hoteliers have introduced only minor changes coming few and far apart: Holiday Inn debuted the Double Queen bed room, someone painted a white wall grey, and a few have finally managed to add Wi-Fi. But a new wave of guests, the oft-discussed millennial generation, is demanding a new type of hotel that poses to fundamentally alter the industry. Initially dismissed as outlandish, the boutique hotel model is entering the mainstream, falling into favour with the latte-and-laptop generation over the carbon copy boxes championed by brands like Hilton, InterContinental, and Marriott. But responding to these needs is more than a momentary race for market share. As the big hoteliers move into the boutique game hoping to recapture the modern-day traveller, they are altering the industry at its roots, and perhaps unknowingly, sowing the seeds for a whole new way of doing business in the hotel space.

Traditionally the major players in the hotel industry left innovation to avant-garde boutique hotels. These city-based concepts that rose to prominence in the 1980s were viewed largely as fads. Hotels like the Bedford in San Francisco and The Blakes Hotel in London catered to an insignificant group in search of a sophisticated, unique, and off-beat hotel experience. For these people the boutiques acted as a counterweight to the unchallenged standardisation of the bigger chains. As the New York Times’ David Brooks explains in the The Edamame Economy, “instead of offering familiarity, they offered difference. Instead of offering beige, they offered edginess, art, emotion and a dollop of pretension.”

Avant Garde: Boutique hotels reimagined the guest experience, but most took it too far for the average consumer

Standing strong behind staggering economies of scale and multi-brand loyalty programs, the larger hotel groups did not consider the forward-thinking boutiques a threat. This belief was reinforced as they expanded globally throughout the 1980-90s. The chains employed a growth model that demanded the standardisation and commoditisation of their products, giving rise to what is now known as the ‘box hotel concept.’

Not exactly something to rave about: Box-like hotels offering a consistent and uniform experience can be found all over the world

All around the world, hoteliers adhere to cookie-cutter methods that centre on a number of familiar core products and capabilities. Standard Operating Procedures (SOPs) delineate exactly how hotel staff must behave to maintain the brand’s image. A 2010 Hilton manual outlines how a caller’s name must be used twice during a call. Housekeeping staff at Marriott famously follow a 66-point checklist for guest room servicing and ensure the sheets in Kuala Lumpur have same specified thread-count as those used in London.

While the consistency of these brands is a remarkable accomplishment, the ‘McDonaldisation’ of the hotel experience has made the experience what The Economist calls an “emotional failure.” Inherently, the model continues to see economic success due to its established reliability and worldwide network. After all, the familiar red Marriott logo remains one of the surest signs of comfort and a decent night’s sleep. Undeniably however, there is a  growing segment of travellers looking for more. Currently only serviced by boutique hotels, more and more big hoteliers are looking to tap into this market of affluent, trendsetting travellers.

The Modern Guest

As the larger hotels look to the boutiques for their pioneering insight, the greatest difference is surely the type of guest. The modern traveller, who is as likely to step out of a sleek black Uber wearing a tailored suit as arrive in a t-shirt and jeans after using the Tube, is one of the most significant changes in the hotel industry’s recent history.

Unpredictable: The millennial generation is one less characterised by age than by style, interest, and diversity.

“Guests used to come for one of two things: business or pleasure,” says Patrick Tan, a student at Cornell and front-office supervisor at the school’s esteemed Statler Hotel. “Now it’s a mix of work and play that involves everything from business meetings and art gallery visits to city tours to drinks at the city’s best bars”

Tan’s statement is supported by market research. A 2013 survey conducted by a Hilton Garden Inns saw 45% of respondents cite new experiences as the best part of business travel. For 65% of the survey-takers exploring a new city was the number one motivator to extend a business trip.

More than ever before, the hotel guest has transcended the confines of their hotel. Keen to explore, curious, social, and often combining work and weekend trips, the modern traveller and guest no longer looks for the uniformity offered by the larger business chains.

“People are seeking unique experiences. They are seeking hotels that are distinctive from others in style, design and service.” writes Veronica Waltdhausen in a study for leading Hospitality Consultants HVS.

In the golden age of hotels, people came to be pampered and surrounded themselves with luxury. It was under this model that the star system, where the number of stars equates to higher price point, came into being. But the modern-day traveller is no longer looking for a money-driven experience. Instead of status symbols they seek experiences.

“Do they really want a Nespresso machine in their room (the proud new addition to most hotel rooms),” Waldthousen asks. “Wouldn’t a guest be much more likely to relax in a bar in the hotel’s lobby lounge and drink a coffee surrounded by other people?”

This movement away from the tangible product to an experiential one is complemented by a change in what millennial consumers look for in hotels. Rooms at CitizenM, the contemporary Dutch hotelier that was one of the first players to act on these new demands, feature plush beds, high-powered rain-showers, and free WiFi and movies. Advertisements for the hotel, however, centre on the actual guest experience, highlighting “a great night’s sleep” and “a love for free movies on demand.”

The lobby of CitizenM’s Bankside property in London features contemporary art and furniture, a happening bar-scene, and some of the capital’s coolest meeting spaces

The company’s mantra – affordable luxury for the people – does away with unnecessary luxuries over which many hotels compete. The hotel’s lobby swapped out doormen and luggage carts, favouring automated check-in kiosks that set room temperature and mood lighting to a personalised preference upon a guest’s arrival. A buzzing bar and eatery is complemented by sharp but inviting italian furniture, contemporary art and books, as well as dynamic meeting spaces right off the lobby-floor.

“The lobby is more like a living room than anything else,” says Noreen Chadha, CitizenM’s Commercial Director. “The room is the place to sleep and relax while the lobby is the perfect place to work, meet, eat, and drink.”

As Chadha explains, the physical boundaries that once distinguished hotel lobbies, bars, and restaurants are blending together. The open-space lobbies of hotels like CitizenM or the Ace Hotel simultaneously entertain an array of work meetings, lunch dates, happy hours, and even musical performances. For the hotels, the lobby’s transformation works to bring in both guests and city residents. Whereas the typical hotel bar and restaurant sits mostly empty, these venues hum and buzz, drawing in both the hotel guests and local crowds. For these kinds of hotels, the restaurant can move from being a money-losing nicety to a key asset. According to a Business Journals report, hotels that share their vision and values with restaurants can see up to 20% of revenues coming from food and beverage operations.

The hotels also benefit by being able to generate more revenue per square foot. While the larger corporate hotels may have higher occupancy levels and even feature several restaurants, a comparably-priced boutique hotel that optimises its space and plays host to more guests and visitors in its bar, restaurant, or lobby will have greater revenue per square footage. So while it is difficult to make an apples-to-apples comparison, the boutique model almost certainly presents a better deal.

Historically, the big hoteliers looked on passively on from the sidelines. Business guests and foreign tourists built work trips and holidays around the reliable and consistent nature of the big chains. From Caracas to Mumbai, a Hilton was a Hilton.

But as the millennial generation approaches its peak, a new type of guest is emerging. No longer impressed by turn-down service and trouser presses, they seek unique experiences and interactions. Generation X and Y already make up more than 50% of hotel bookings. And with the boutique industry expected to increase at 6.5% annual rate between 2014 and 2019 according to an IBIS World report, each of the major chains is now keen to capitalise on this growing industry.

Bringing in the Big Boys

With the hospitality industry continuing its post-recession recovery, the large hoteliers are looking to diversify their portfolios. Though boutique hotels took a 12.7% hit in 2009 with revenue per available room (RevPAR) falling as much as 30%, the segment typically yields high profit margins. During times of economic upswing, boutique hotels are more attractive than ever. Generally low-cost investments, they attract an affluent customer and offer an exciting opportunity for brand building. Among the hotel industry’s largest operators, these projects are being fast-tracked by forecasts about the vastly different needs of the rapidly expanding millennial segment.

Source: IBIS World

Besides the substantial research pointing to the millennial opportunity, one of the industry’s largest players, Starwood, is already knee-deep in the boutique world. The company, whose 10-brand portfolio demands about 12% market share in the boutique industry according to IBIS World, owns some of the industry’s leading names. Its W, Aloft, and Element hotels and franchises have proved to be  “game-changing” for the company and continue to lead and “disrupt” their respective industries, according to Starwood’s 2012 report. In each market, these Specialty Select Brands (SSBs) continue to drive growth*. In Canada, the hotelier’s Element brand debuted just last year but has already overtaken its competitors on the popular comparison website TripAdvisor.

Early Adopters: W Hotels have brought the boutique model to a global audience

Given Starwood’s demonstrated track-record, more and more of the major players are launching brands into the space. Next year, Marriott will debut its Moxy brand in partnership with the Swedish design giant, IKEA. Despite it being the world’s largest hotelier’s first foray into the millennial space, the hotels feature a now-familiar model of design, approachability, and affordability. By a similar token, the parent of the normally no-frills Radisson brand plans to spend $140 million building or acquiring the first five properties of its new, daring Radisson Red brand. The hotel, which channels the concrete, loft-like feel of a modern art gallery joins Starwood’s Aloft, Hyatt’s Andaz, and InterContinental’s Hotel Indigo brands .

Carlson Redizor’s new Radisson Red concept brings a boutique-element to its normally no-frills approach

It goes without saying that the entry of the larger players has dramatically increased the size of the boutique industry. As explained by IBIS World, the industry is “on its way up to the penthouse,” with industry growth expected to surpass pre-recession levels before 2019. Fielding heightened demand from a 3.1% and 2.7% annualised increase in the number of international arrivals and domestic trips respectively, hotel operators will see a surge in demand in both domestic as well as foreign markets.

On the rise: Domestic trips and international arrivals are driving up hotel occupancy numbers

A Boutique Bubble?

While the numbers point to a triumphant ‘go,’ questions remain about the viability of this new model. For one it seems as though both boutique and big brands occasionally lose sight of the purpose of this modernisation. From a literal standpoint, critics of Marriott’s upcoming Moxy brand claim the brand’s fast-paced rollout – which hopes to build 150 Moxy hotels in Europe over the next 10 years – may be too ambitious. Others cite the location of its first property next to Milan’s Malpensa airport as too far removed for the economically-minded millennial.

In a 2007 article for The Wall Street Journal, Darren Everson highlights some of the industry’s more fundamental issues. Everson sketches the stay of a University of Southern California graduate student staying at the W Chicago City Center hotel, citing confusion and discomfort.

“There is a backlash brewing against boutique hotels,” Everson writes. “[While] W’s are still thriving, the…segment is finding that some customers – even once loyal ones – are getting tired of their tragically hip ways.”

Indeed, as the industry giants skip from baby steps to a full-steam sprint, they risk alienating their newest customer before they even arrive at the hotel’s doorstep. In the age of cut-throat competition and review sites like Hotels.com and TripAdvisor, just a few negative reviews can result in being crossed permanently off the list.

So, while the millennial guest has almost certainly swapped room service and bidets for contemporary design and free Wi-Fi, certain elements remain, and are perhaps more relevant than ever. Though veterans of the old-model, consistency, loyalty incentives, and good service remain at the top of the list for many consumers. The form follows function principle continues to reign supreme (as this author found out when water from his shower spread cooly across the entire bathroom floor at The Standard Hotel).

Form over function: The Standard Hotel in NYC features some of the industry’s coolest, and most inconvenient, designs

For the boutique industry, the entry of everyone from Hyatt to Hilton ushers in an unprecedented era of competition. For the full-line producers however, the move into the boutique space may be the first step to fundamental change the hotel industry as a whole. While currently still limited to one or two brands in the portfolio, the tenets driving the change: change in the core customer, promises to revolutionise the field.

As Jeffrey Catrett points out in his article for Hotel Business Review, similar changes to the retail and other service sectors have forced industry-wide overhaul. For the standardised hotel industry, the costs of changing thousands of properties around the world seems almost unimaginable. The ageing core products of these hotels – behemoth conference spaces, spas, and other amenities – may soon be more or less obsolete. While the luxury segment, particularly resorts, will be sure to carve its own niche, the mainstream hotels may soon face something of a crisis. Indeed, changing consumer trends sometimes stirs trouble. For the hotel industry and the biggest players in particular, however, they just might change the way they do business entirely.

*Starwood’s Annual report does not provide a financial breakdown of each brand, making it difficult to quantify how much each contributes to the company’s overall profitability and growth.